Illinois Tool Works (NYSE:ITW) and Flowserve (NYSE:FLS) are both industrial products companies, but which is the better investment? We will contrast the two businesses based on the strength of their earnings, valuation, dividends, profitability, risk, analyst recommendations and institutional ownership.
Institutional and Insider Ownership
77.4% of Illinois Tool Works shares are owned by institutional investors. Comparatively, 98.4% of Flowserve shares are owned by institutional investors. 0.8% of Illinois Tool Works shares are owned by insiders. Comparatively, 0.4% of Flowserve shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.
Volatility & Risk
Illinois Tool Works has a beta of 1.07, indicating that its share price is 7% more volatile than the S&P 500. Comparatively, Flowserve has a beta of 1.75, indicating that its share price is 75% more volatile than the S&P 500.
Profitability
This table compares Illinois Tool Works and Flowserve's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
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Illinois Tool Works | 16.77% | 80.95% | 14.37% |
Flowserve | 3.38% | 14.41% | 5.07% |
Earnings and Valuation
This table compares Illinois Tool Works and Flowserve's top-line revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
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Illinois Tool Works | $14.11 billion | 5.02 | $2.52 billion | $7.75 | 28.85 |
Flowserve | $3.94 billion | 1.31 | $253.67 million | $2.20 | 18.08 |
Illinois Tool Works has higher revenue and earnings than Flowserve. Flowserve is trading at a lower price-to-earnings ratio than Illinois Tool Works, indicating that it is currently the more affordable of the two stocks.
Dividends
Illinois Tool Works pays an annual dividend of $4.56 per share and has a dividend yield of 2.0%. Flowserve pays an annual dividend of $0.80 per share and has a dividend yield of 2.0%. Illinois Tool Works pays out 58.8% of its earnings in the form of a dividend. Flowserve pays out 36.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Illinois Tool Works has increased its dividend for 50 consecutive years and Flowserve has increased its dividend for 1 consecutive years. Illinois Tool Works is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Analyst Ratings
This is a summary of recent ratings and target prices for Illinois Tool Works and Flowserve, as reported by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
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Illinois Tool Works | 1 | 11 | 4 | 0 | 2.19 |
Flowserve | 0 | 8 | 1 | 0 | 2.11 |
Illinois Tool Works currently has a consensus price target of $206.0625, indicating a potential downside of 7.84%. Flowserve has a consensus price target of $35.3750, indicating a potential downside of 11.07%. Given Illinois Tool Works' stronger consensus rating and higher possible upside, equities analysts plainly believe Illinois Tool Works is more favorable than Flowserve.
Summary
Illinois Tool Works beats Flowserve on 13 of the 17 factors compared between the two stocks.